TFG Istanbul Morning Report (TFG Istanbul Menkul Değerler )

• The BIST managed to pare its intraday losses amid a rather sluggish trading session to close 0.13% higher at 4790, and with accustomed turnover of TRY 47.5bn, due to the dip buyers towards the close, with the Banks rising by 1.11%, whereas the Mining stocks are continuing to get chipped away, losing near another 3% in value. The European markets also closed higher thanks to Deutsche Bank and Barclays profits beating expectations, and thus calming nerves regarding the sector for the time being.
• GARAN-thanks to its stellar 1Q23 results, led the gains at the BIST30, and was followed by BIMAS and FROTO, whereas KOZAA, KOZAL, and TAVHL were laggards.
• Today, we expect the gains from yesterday to continue at the opening.
• As of yesterday’s close, the TRY is trading a tad weaker against the USD at 19.45, and weaker against the Euro at 21.45, whereas the DXY is flat at 101.66 and both the 2yr and 10yr bond yields rose by 147bps and 8bps to 15.83% and 12.37%, respectively.
• On the commodity front, Brent is trading higher this morning at 78.72, and ounce and gram GOLD are flat at USD 1242 and TRY 1986, respectively.
• Yesterday, the CBRT left the O/N policy rate unchanged as expected at 8.5%, while Argentina hiked 1000bp to 91%, trying to catch up with inflation.
• March Economic Confidence rose to 102.2 from the previous month’s reading of 98.8.
1Q23 FINANCIAL RESULTS
• FROTO: NEUTRAL: Disclosed a Q1 net profit of TRY5.4bn that was in line with expectations , albeit a 35% q-q slump. EBITDA fell by 13% q-q, arriving at TRY6.7bn in line with expectations, and the EBITDA margin landed at 10.1%. We envisage a tepid market response to these results as they were in line with the market's anticipations on all fronts.
• GOODY POSITIVE: Posted TRY369mn net profit, TRY616mn EBITDA and TRY4329mn sales in its 1Q23 financials. Company recorded remarkable 14.2% EBITDA margin in 1Q 2023 compared to our expectations of 8.0% due to strong domestic market. Sales volume of CV tires grew 12.9% YoY whereas passanger car tire sales volume was the same. Since CVs have higher margins, growth coming from CV’s are remarkable. Even though export markets were weak, which suffered yoy 6% volume shrinkage, domestic replacement segment grew yoy 10.%. Since the company’s most profitable segment is domestic replacement tires, mark We maintain our BUY call with a target price of 23.3. We think that even though exceptional EBITDA margin in 1Q23 are not likely to be sustainable, Company is trading at 2.9x EV/EBITDA 2024 US$ multiple, has a secure position and the stock price provides attractive entry point in our view.
• OTKAR NEGATIVE: The company posted disappointing 1Q23 financials. Despite net sales exceeding expectation by 8.6% at TRY2.5bn, EBITDA came out negative TRY114mn vs market forecast of positive TRY143mn. The company posted a net loss of TRY515mn for 1Q23 vs expectation of TRY56mn. EBITDA margin also stood at negative 4.5% even though market estimate was 6.1%.
• TATGD: POSITIVE: 1Q23 EBITDA and net profit exceeded market consensus by 5.8% and 27.4% and stood at TRY164mn and TRY98mn respectively. EBITDA margin exceeded expectation by 110bps at 14.6% while net sales for quarter were in line with forecasted at TRY1.12bn.
• TOASO NEGATIVE: The company’s financials for 1Q23 came out disappointing. Net sales, EBITDA and net profit were below market consensus at TRY18.74bn, TRY2.87bn and TRY2.43bn respectively. Net sales and net profit were 4% below forecasted while EBITDA came out 19.5% lower than expected. EBITDA margin for 1Q23 was also 300bps lower than expected at 15.3%. The company has also revised its 2023 guidance as follows: expects domestic toal PC+LCV vehicles to be 875k-925k from the prev. 775k-825k; TOASO domestic market sales to be 175k-190lk from 150k-165k; Exports at 70k-80k; and total production at 230k-245k units. The EBITDA margin is expected to remain unchanged at 12%, and CAPEX has been increased to TRY 125mn from the €100mn.
• TKFEN: NEGATIVE: Tkfen has reported lackluster Q1 results, with a net loss of TRY360mn, which is in stark contrast to the market's anticipation of a net profit of TRY421mn. Capex of TRY556mn, up 225% y-y, and earthquake expenditures of TRY299mn seem to have deeply impacted the company's net profit. Additionally, EBITDA amounted to TRY209mn, plummeting by 51% compared to the expected figure, while the EBITDA margin clocked in at a dismal 2.3%, which is 2.8pp lower than the market estimation. The company states that the year-end backlog amount is expected to be around US$1.1bn - US$1,2bn.
• TUPRS: POSITIVE: Net sales for 1Q23 came out in line with market expectations at TRY92.8bn (market forecast: TRY96.6bn) while EBITDA exceeded consensus by 14% and stood TRY12.1bn. Net profit was above market estimate by 5% at TRY6.7bn. EBITDA margin for the quarter stood at 13%, 210bps higher than expected. However indicative diesel product margin that plunged down from US$50 to US$25 q-q in 1Q23, is currently down to a mere US$14, indicating for softer operational performance for Tupraş for 2Q23.
NEWS FLOW:
• ALCTL: Disclosed that it has signed a USD 46.3mn agreement with TTKOM
• EREGL: Disclosed that it will earmark TRY 1bn for share buyback
Foreigners' limited appetite
• Non-residents bought US$37mn of equities and sold US$24mn of bonds in the week ending on April 21st. Limited foreign investor appetite for was insufficient to keep BIST’s performance up. Foreigners have reduced their equity holdings by US$785mn ytd. Notably, foreign participation in the bond market has plummeted to an unprecedented all-time low of 0.6%, while their share in the free float of the stock market still hovers around record lows at 28.8%.
AGENDA:
• There are no major macro releases expected on the local side, whereas the US Personal Income, Core PCE and Consumer Confidence Sentiment will be released.

 TFG Istanbul Menkul Değerler A.Ş.
  www.tfgistanbul.com/arastirma-raporlar
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